What’s the Perfect Age to Start Retirement Planning?
The truth is that putting an age to retirement planning isn’t necessarily the right way to go about it. Ideally, the perfect time to start retirement planning is when you get your first pay check; however, for most people this doesn’t happen. Somewhere in the mix of finding a place to live, food to eat, a family to support, and keeping your job, the idea of planning for something forty years down the road gets lost in thought. This is completely understandable, yet it’s a still a mistake. In order to understand why it’s so important to start planning for retirement right away, it’s important to know how compound interest works and how you can use it to make money.
Retirement plans aren’t just savings plans where money is taken from your account and stashed away for a later day. They’re a way for you to actually make money. In fact, potentially a lot of money if done properly. The key is understanding what compound interest is. Compound interest is the force which drives retirement accounts. It differs from the more commonly known and discussed simple interest. Simple interest is interest with a fixed rate. For example, if you put $100 in an account that has a 10% simple interest rate, you can expect to gain interest payments based off the original principle you put into the account ($100). Now, if you put $100 into an account with compounding interest, the interest you gain is based of your principle plus any interest you’ve make. In other words, compounding interest is interest that builds on itself. It’s a way for you to make money by doing nothing.
Putting Money in a Retirement Account
Once you have a good understanding of what compound interest is and how it works, it becomes much easier to justify taking money out of your account and putting it into a retirement account. The question now becomes: how much should I take out? The answer is as much or as little as you can afford. The amount really isn’t that important. What’s important is that you’re consistently putting something into the account. This will give your account a chance to compound in the manner described above. If done for a long enough time, you can make a tremendous amount of money. This should make you feel good about not only your future financial state, but your current one as well.
If you’re smart and start planning for retirement early, that’s great. If you’ve already dropped the ball and are years or even decades into your career and haven’t put a single thought into retirement, it’s not the end of the world. The past isn’t what’s important. The present is. Now is the time to start planning for your retirement by putting money into your account. Search for an experienced and trusted financial planning company that can help you with your retirement planning and you will be on the right track to being prepared when your retirement day arrives.